UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                              Washington D.C. 20549
                                    ---------

                                    FORM 10-Q

                Quarterly Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

For the quarter ended     December 31, 1998    Commission File Number     0-8693

                              TRANSNET CORPORATION
             (Exact name of registrant as specified in its charter)

               Delaware                                      22-1892295
            (State or other jurisdiction of              (I.R.S. Employer
            incorporation or organization)              Identification No.)

            45 Columbia Road
            Somerville, New Jersey                           08876-3376
            (Address of principal executive offices)        (Zip code)

Registrant's telephone number, including area code:             (908) 253-0500
                                                      --------------------------


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the  Securities  and  Exchange Act of 1934
during the preceding 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days.

                              Yes   X      No


Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock as of February 2, 1999: 5,216,804.


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TRANSNET CORPORATION AND SUBSIDIARY
------------------------------------------------------------------------------


INDEX TO FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 1998.
------------------------------------------------------------------------------





PART I:  FINANCIAL INFORMATION

Item 1.  Financial Statements

   Consolidated Balance Sheets as of December 31, 1998 [Unaudited]
   and June 30, 1998 ............................................... 1.....

   Consolidated Statements of Operations for the three and six months
   ended December 31, 1998 and 1997 [Unaudited]..................... 2.....

   Consolidated Statements of Cash Flows for the six months ended
   December 31, 1998 and 1997 [Unaudited]........................... 3.....

   Notes to Consolidated Financial Statements [Unaudited]........... 4.....

Item 2.  Managements' Discussion and Analysis of the Financial
         Condition and Results of Operations........................ 5.....  7

PART II: OTHER INFORMATION.......................................... 8.....

SIGNATURES.......................................................... 9.....





                    .   .   .   .   .   .   .   .   .   .   .


<PAGE>



TRANSNET CORPORATION AND SUBSIDIARY
------------------------------------------------------------------------------


CONSOLIDATED BALANCE SHEETS
------------------------------------------------------------------------------



                                                  December 31,    June 30,
                                                     1 9 9 8       1 9 9 8
                                                   [Unaudited]
Assets:
Current Assets:
  Cash and Cash Equivalents                        $6,054,098   $ 5,378,846
  Accounts Receivable - Net                         7,226,075     6,327,434
  Inventories                                       1,045,593     1,407,682
  Mortgage Receivable                                 482,168       464,423
  Other Current Assets                                133,923       136,621
  Deferred Tax Asset                                  177,200       177,200
                                                   ----------   -----------

  Total Current Assets                             15,119,057    13,892,206

Property and Equipment - Net                          591,810       613,704

Other Assets                                          870,110       890,608
                                                   ----------   -----------

  Total Assets                                     $16,580,977  $15,396,518
                                                   ===========  ===========

Liabilities and Stockholders' Equity:
Current Liabilities:
  Accounts Payable                                 $1,217,010   $   598,008
  Accrued Expenses                                    549,474       614,875
  Accrued Payroll                                     187,254       234,722
  Floor Plan Payable                                  721,095       776,901
  Deferred Income                                      55,000       100,649
  Income Taxes Payable                                448,915       210,200
  Other Current Liabilities                            97,602       156,653
                                                   ----------   -----------

  Total Current Liabilities                         3,276,350     2,692,008
                                                   ----------   -----------

Deferred Tax Liability                                 80,700        80,700
                                                   ----------   -----------

Stockholders' Equity:
  Capital Stock - Common $.01 Par Value,
   Authorized 15,000,000 Shares; Issued
   7,469,524 Shares[of which 2,252,720 are
   in Treasury]                                        74,695        74,695

  Paid-in Capital                                  10,686,745    10,686,745

  Retained Earnings                                 8,680,130     8,080,013
                                                   ----------   -----------

  Totals                                           19,441,570    18,841,453
  Less:  Treasury Stock - At Cost                  (6,217,643)   (6,217,643)
                                                   ----------   -----------

  Total Stockholders' Equity                       13,223,927    12,623,810
                                                   ----------   -----------

  Total Liabilities and Stockholders' Equity       $16,580,977  $15,396,518
                                                   ===========  ===========

See Notes to Consolidated Financial Statements.


                                         1

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TRANSNET CORPORATION AND SUBSIDIARY
------------------------------------------------------------------------------


CONSOLIDATED STATEMENTS OF OPERATIONS
[UNAUDITED]
------------------------------------------------------------------------------



                                   Three months ended       Six months ended
                                      December 31,            December 31,
                                      ------------            ------------
                                   1 9 9 8     1 9 9 7     1 9 9 8     1 9 9 7
                                   -------     -------     -------     -------

Revenue                         $10,975,140 $20,282,544 $23,894,577 $39,796,129

Cost of Revenue                   8,801,416  18,016,064  19,549,273  35,590,181
                                ----------- ----------- ----------- -----------

  Gross Profit                    2,173,724   2,266,480   4,345,304   4,205,948
                                ----------- ----------- ----------- -----------

Expenses:
  Selling, General and
   Administrative Expenses        1,784,809   1,996,104   3,596,546   3,670,376
  Bad Debt Expense                    7,500      10,000      15,000      17,500
                                ----------- ----------- ----------- -----------

  Total Expenses                  1,792,309   2,006,104   3,611,546   3,687,876
                                ----------- ----------- ----------- -----------

Operating Income                    381,415     260,376     733,758     518,072
                                ----------- ----------- ----------- -----------

Other Income [Expense]:
  Interest Income                    73,014      26,288     159,357      69,998
  Other Income                           --     466,489          --     466,489
                                ----------- ----------- ----------- -----------

  Total Other Income - Net           73,014     492,777     159,357     536,487
                                ----------- ----------- ----------- -----------

  Income Before Provision for
   Income Taxes                     454,429     753,153     893,115   1,054,559

Provision for Income Tax            153,000     257,000     292,998     265,000
                                ----------- ----------- ----------- -----------

  Net Income                    $   301,429 $   496,153 $   600,117 $   789,559
                                =========== =========== =========== ===========

Income Per Common Share         $      0.06 $      0.10 $      0.12 $      0.15
                                =========== =========== =========== ===========


See Notes to Consolidated Financial Statements.

                                         2

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TRANSNET CORPORATION AND SUBSIDIARY
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CONSOLIDATED STATEMENTS OF CASH FLOWS
[UNAUDITED]
------------------------------------------------------------------------------



                                                           Six months ended
                                                             December 31,
                                                          1 9 9 8     1 9 9 7
                                                          -------     -------
Operating Activities:
  Net Income                                           $   600,117 $   789,559
                                                       ----------- -----------
  Adjustments to Reconcile Net Income to Net Cash:
   Depreciation and Amortization                           148,407     155,160
   [Gain] Loss on Sale                                       2,921    (466,489)
   Provision for Doubtful Accounts                          15,000          --

  Changes in Assets and Liabilities:
   [Increase] Decrease in:
     Accounts Receivable                                  (955,809) (2,423,306)
     Inventory                                             362,089      78,126
     Other Current Assets                                    2,698      27,380
     Other Assets                                           (2,167)    (96,337)
     Mortgage Receivable - Related Party                    24,423          --
     Deferred Income Taxes                                      --     240,000

   Increase [Decrease] in:
     Accounts Payable and Accrued Expenses                 553,601   1,255,986
     Deferred Income                                       (45,649)     66,244
     Other Current Liabilities                            (106,519)     38,145
     Income Taxes Payable                                  238,715          --
                                                       ----------- -----------

   Total Adjustments                                       237,710  (1,125,091)
                                                       ----------- -----------

  Net Cash - Operating Activities                          837,827    (335,532)

Investing Activities:
  Capital Expenditures                                    (106,769)         --

Financing Activities:
  Floor Plan Payable                                       (55,806)   (241,121)
                                                       ----------- -----------

Net Increase [Decrease] in Cash and Cash Equivalents       675,252    (576,653)

Cash and Cash Equivalents - Beginning of Periods         5,378,846   3,336,917
                                                       ----------- -----------

  Cash and Cash Equivalents - End of Periods           $ 6,054,098 $ 2,760,264
                                                       =========== ===========

Supplemental Disclosures of Cash Flow Information:
  Cash paid during the periods for:
   Interest                                            $        -- $        --
   Income Taxes                                        $    25,470 $     8,878





See Notes to Consolidated Financial Statements.

                                         3

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TRANSNET CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[Information as of December 31, 1998 and 1997 Is Unaudited]
------------------------------------------------------------------------------




[1] Summary of Significant Accounting Policies

[A] Consolidation - The consolidated  financial  statements include the accounts
of  the  Corporation  and  its   wholly-owned   subsidiary,   Century   American
Corporation.  Intercompany  transactions  and accounts  have been  eliminated in
consolidation.

[B]  Inventory  -  Inventory  consists  of  finished  goods.  The  Corporation's
inventory is valued at the lower of cost  [determined on the average cost basis]
or market.

[C] Cash and Cash Equivalents - For the purposes of the statement of cash flows,
the  Corporation  considers  highly liquid debt  instruments,  purchased  with a
maturity of three months or less, to be cash equivalents.

[D]  Earnings  Per Share -  Earnings  per  common  share are based on  5,216,804
weighted shares outstanding for the periods ended December 31, 1998 and 1997.

[2]  Income Taxes

The  Corporation  has a  deferred  tax  asset of  $177,200  and a  deferred  tax
liability of $80,700 based upon temporary timing differences including inventory
capitalization,  allowance  for  doubtful  accounts,  vacation  pay accruals and
depreciation.

[3] Reclassification

Certain items from the prior year's financial  statements have been reclassified
to conform to the current year's presentation.

In the opinion of management,  the accompanying unaudited consolidated financial
statements   contain  all  adjustments   consisting  only  of  normal  recurring
adjustments  necessary to present fairly the financial position,  the results of
operations and cash flows for the periods presented.

These  statements  should be read in conjunction with the summary of significant
accounting  policies and notes contained in the  Corporation's  annual report on
Form 10-K for the year ended June 30, 1998.

[4] Related Party Transaction

On  November  11,  1997,   the   Corporation   executed  an  agreement  to  sell
approximately 6.32 acres of unimproved real property in Mountainside, New Jersey
[the "Real  Property"] to W Realty LLC ["W Realty"] for the  appraised  value of
$1,000,000.  W Realty is a partnership  consisting of John J. Wilk,  Chairman of
the Board,  and Raymond J. Rekuc,  a Director of the  Corporation.  The purchase
price is payable  through a credit  extended  by W Realty as  sub-lessor  to the
Corporation  as sub-lessee  for the $410,000 of rent payable by the  Corporation
over  the  last  two  years  of its  sublease  for  its  principal  facility  in
Somerville,  New Jersey  and a $590,000  promissory  note  executed  by W Realty
payable in  installments  of $150,000 in February  1998 and $440,000 in November
1998.  The note bears  interest  at the rate of 8% per annum and is secured by a
mortgage on the Real  Property.  The $150,000  payment due in February  1998 has
been paid and  $190,000 of the  payment due in November  1998 has been paid with
interest. As of the date of this filing, the balance of $250,000 is overdue.



                      .   .   .   .   .   .   .   .   .   .

                                        4

<PAGE>



Item 2:

TRANSNET CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
------------------------------------------------------------------------------


Results of Operations

Revenues  for the three  months  ended  December  31, 1998 were  $10,975,140  as
compared  with  $20,282,544  for the quarter  ended  December 31, 1997.  For the
quarter ended December 31, 1998 the Corporation  reported net income of $301,429
as  compared  with net income of $496,153  for the  similar  period in the prior
fiscal year.  Operating  income  totaled  $381,415 in the more recent quarter as
compared to $260,376 in the similar  period in fiscal  1998.  For the six months
ended December 31, 1998, revenues were $ 23,894,577,  as compared to $39,796,129
reported for the similar  period in the prior  fiscal  year,  with net income of
$600,117 for the period ended  December  31, 1998,  compared  with net income of
$789,559 for the same period in the prior fiscal year.  Operating  income in the
six months  ended  December  31, 1998 was  $733,758  compared to $518,072 in the
similar  period in fiscal  1998.  The net  income  for the  periods in the prior
fiscal year was affected by the non-recurring gain from the sale of certain real
property owned by the Corporation.  The decrease in revenues is primarily due to
the loss in March 1998 of the hardware  sales  contract  with the  Corporation's
major  customer,  and is also a result of  management's  shift in focus from low
profit margin  hardware  sales to sales of higher  profit  margin  technical and
training  services.  The loss of the contract has not had any negative impact to
date on services or service related  revenues and has reduced the  Corporation's
hardware-related  expenses.   Revenues  attributable  to  service,  support  and
training operations  increased by approximately 80% compared to the same periods
in the prior year.  This increase  offset the effect of the decrease in revenues
from hardware sales.

Earnings  for the quarter  and  six-month  period  ended  December  31, 1998 are
attributable  to the  significant  increase  in service,  support  and  training
operations,  and  management's  concentration  on sales of  network  and  system
integration  products  which yield higher profit  margins,  as well as continued
adherence to and  implementation of cost control measures.  Service and training
related  revenues are  significant in their  contributions  to earnings  because
these  operations yield a higher profit margin than equipment sales. In addition
to the technical  service sales referenced  above, for the quarter and six-month
period ended  December 31, 1998,  the increase in revenues from the provision of
service,  support,  outsourcing and network integration is largely the result of
the Corporation renewing and/or entering into service contracts with a number of
large  corporate  customers.  Most of these  contracts are  short-term,  usually
twelve months or less, and contain  provisions  which permit early  termination.
Although the contracts  generally  contain renewal terms,  there is no assurance
that such renewals will occur.

The  computer  industry  continually  faces  a trend  of  decreasing  prices  of
computers  and  related  equipment.  Management  believes  that this  trend will
continue.  Industrywide,  the  result of price  erosion  has been  lower  profit
margins on hardware sales,  which require businesses to sell a greater volume of
equipment to maintain past earning levels. Another result of the price decreases
has  been   intensified   competition   within  the   industry,   including  the
consolidation  of businesses  through merger or acquisition  and the entrance of
manufacturers  into technical services  business.  Management  believes that the
adoption of policies by many larger  corporate  customers to limit the number of
vendors  permitted to provide goods and services for  specified  periods of time
has further increased price  competition.  To meet these competitive  challenges
and to maximize the  Corporation's  profit  margin,  management has modified its
marketing  strategy  and has enforced  expense  controls.  Management's  current
marketing strategy is designed to increase sales of lower revenue/higher  profit
margin products related to service,  technical support and training  operations.
Management's efforts include targeting commercial,  educational and governmental
customers which provide  marketplaces  for a wide range of products and services
at one  time,  a  cost-effective  approach  to  sales.  Management  believes  it
maximizes  profits through  concentration on sales of value-added  applications;
promotion of the Corporation's service and support operations;  and adherence to
cost-cutting  controls.  In  light  of  the  above,  management  emphasizes  and
continues the aggressive pursuit of an increased volume of technical service and
support programs and promotion of its training services.

                                        5

<PAGE>



TRANSNET CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
------------------------------------------------------------------------------


Results of Operations [Continued]

Selling,  general and administrative  expenses increased to approximately 15% of
revenue  for both the  quarter  and six months  ended  December  31, 1998 due to
increased salary and personnel related expenses  resulting from the expansion of
the Corporation's technical staff as well as the decrease in revenues.  Selling,
general and  administrative  expenses were  approximately 9% of revenues for the
same periods in fiscal 1998.

Interest income increased in the quarter and six-month period ended December 31,
1998, as compared to similar periods in the prior fiscal year primarily due to a
stronger cash position,  which allowed the  Corporation to invest larger amounts
than in prior years.

Liquidity and Capital Resources

There are no material commitments of the Corporation's capital resources.

The  Corporation  currently  finances a portion of its accounts  receivable  and
finances   purchases  of  portions  of  its  inventory  through   floor-planning
arrangements  under  which  such  inventory  secures  the  amount   outstanding.
Inventory decreased in the quarter and six-month periods ended December 31, 1998
as compared to the corresponding  period in the prior fiscal year in response to
the lower level of hardware sales.

Accounts  receivable  decreased  for the  quarter  and  six-month  period  ended
December  31, 1998 as compared to the same periods in the prior fiscal year as a
direct result of the decrease in revenues.  Accounts  payable  decreased for the
quarter and  six-month  period ended  December 31, 1998  compared  with the same
periods in the prior fiscal year as a result of management's  efforts to shorten
payable  cycles and thereby  avoid floor plan  financing  costs,  as well as the
reduced  inventories.  Cash levels  increased in the three and six month periods
ended December 31, 1998 as compared to the corresponding  periods in fiscal 1998
due to increased sales of higher profit margin services.

For the fiscal quarter and six months ended December 31, 1998, as in the similar
periods in the prior  year,  the  internal  resources  of the  Corporation  were
sufficient to enable the Corporation to meet its obligations.

In the first  quarter of fiscal 1998,  management  was apprized of an unasserted
possible claim or assessment involving the Corporation's  Pension Plan. The Plan
was adopted in 1981 as a defined  benefit  plan. In 1989,  various  actions were
taken by the  Corporation  to  terminate  the Plan,  to  convert it to a defined
contribution plan and to freeze benefit accruals. No filing for plan termination
was  made  with  the  Pension  Benefit   Guaranty   Corporation   [the  "PBGC"].
Additionally,  a final  amended and restated  plan  document  incorporating  the
foregoing  amendments and other required amendments  including those required by
the Tax  Reform  Act of 1986 do not  appear to have been  properly  adopted.  In
addition, since 1989, it appears that certain operational violations occurred in
the  administration  of the Plan including the failure to obtain spousal consent
in certain instances where it was required.

The  Corporation  has  determined  to (i) take  corrective  action under the IRS
Walk-in  Closing  Agreement   Program  ["CAP"],   (ii)  apply  for  a  favorable
determination  letter with respect to the Plan from the IRS, and (iii) terminate
the Plan.  The CAP program  provides a correction  mechanism for  "non-amenders"
such  as the  Corporation.  In  December  1998  the  Corporation  submitted  the
appropriate  Plan documents and related data to the IRS and PBGC.  These matters
are presently under consideration by these agencies.  Under CAP, the Corporation
will be  subject to a  monetary  sanction  [which  could  range  from  $1,000 to
approximately  $40,000].  In  addition,  the  Corporation  will be  required  to
correct, retroactively,  operational violations, and to pay any resulting excise
taxes and PBGC  premiums  and  penalties  that may be due.  Special  counsel has
advised the  Corporation  that  although it believes that the  Corporation  will
incur some  liability in  connection  with the  correction  of such  operational
violations,  it is not possible to estimate the potential amount of or the range
of liability at this time.


                                        6

<PAGE>



TRANSNET CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
------------------------------------------------------------------------------



Year 2000

Many existing computer systems,  including certain of the Corporation's internal
systems,  use only the last two digits to identify years in the date field. As a
result, these computer systems do not properly recognize a year that begins with
"20" instead of the familiar "19," or may not function properly with years later
than 1999. If not  corrected,  many computer  applications  could fail or create
erroneous  results.  This is  generally  referred to as the "Year 2000" or "Y2K"
issue.  Computer  systems that are able to deal  correctly with dates after 1999
are referred to as "Year 2000 compliant."

With respect to the  Corporation's  internal  systems and  operations,  its main
internal computer system,  which processes  information to prepare  inventories,
purchase orders,  invoices and accounting  functions is Y2K compliant.  To date,
the  Corporation  has spent  approximately  $20,000  to bring its  systems  into
compliance,  and is currently preparing a program to determine whether to update
or replace  other  internal  computer  systems to ensure  compliance.  The costs
involved in such an update and/or replacement have not yet been estimated. As of
the filing of this report,  the Corporation has not prepared a contingency  plan
and will assess the need for such a plan when  sufficient  information  has been
provided by third parties with whom the Corporation has a material relationship.
The Corporation  learned from the product vendors and suppliers with whom it has
a  material  relationship  that  they  are Y2K  compliant.  The  Corporation  is
currently in the process of ascertaining whether its internal systems other than
its computer  systems,  and other  suppliers as well as major  customers are Y2K
compliant.  Because  of the  uncertainties  involved,  pending  receipt  of this
information, it is not possible to estimate the effect upon the Corporation, for
example,  the amount of lost revenues,  if its material  vendors,  suppliers and
customers were not Y2K compliant.

The matters  discussed  in  Management's  Discussion  and  Analysis and that are
forward-looking  statements are based on current  management  expectations  that
involve  risk and  uncertainties.  Potential  risks and  uncertainties  include,
without  limitation:  the impact of  economic  conditions  generally  and in the
industry for  microcomputer  products and  services;  dependence on key vendors;
continued  competitive  and pricing  pressures in the industry;  product  supply
shortages;  open-sourcing of products of vendors;  rapid product improvement and
technological  change,  short  product  life cycles and  resulting  obsolescence
risks; technological developments; capital and financing availability; and other
risks set forth herein.

                                        7

<PAGE>



TRANSNET CORPORATION AND SUBSIDIARY
PART II - OTHER INFORMATION
------------------------------------------------------------------------------



Item 5.  Other Information


Item 6:  Exhibits and Reports on Form 8-K

         A. Exhibits - None required to be filed for Part II of this report.

         B.  Reports on Form 8-K - None filed  during the quarter for which this
report is submitted.


                                        8

<PAGE>


SIGNATURES
------------------------------------------------------------------------------






Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                          TRANSNET CORPORATION


Date: February 9, 1999             By: /s/ Steven J. Wilk
                                      ---------------------------------
                                      Steven J. Wilk,
                                      President



Date:  February 9, 1999            By: /s/ John J. Wilk
                                      ---------------------------------
                                      John J. Wilk,
                                      Principal Financial and Accounting Officer
                                      and Chairman of the Board of Directors



                                        9